Required Minimum Distribution Rollovers

Under the CARES Act passed earlier this year to help ease the financial and economic impact of the Coronavirus, the Required Minimum Distribution (RMD) for retirement accounts (IRA, 401(k), 403(b), etc.) in 2020 have been waived. Anyone who would typically be required or would have been required to start taking RMDs from these types of accounts and even those accounts that are inherited (including inherited Roth accounts) are allowed to skip the distribution for the tax year 2020. This change could be especially useful for those who are required to take annual distributions but have not done so yet. However, what happens to those who have already taken their distribution for 2020? In a typical year, you can redeposit or “rollover” funds back into a retirement account within a 60-day window starting from the date of the distribution. But for many who take their RMD at the beginning of the year or in monthly distributions, they may have already passed this 60-day period, thus disallowing them from being able to redeposit the funds and avoid taxes on the distribution. Another sticking point emerges for those who take RMDs from multiple accounts. Under normal rules, you are only allowed to complete one rollover in a 12-month window. So, if you were to take RMD distributions from multiple accounts you would only be able to roll over one of the distributions and the remaining distributions would be counted as taxable income. Fortunately, the IRS has issued new guidelines for this under Notice 2020-51. The big takeaway from the notice is that for the tax year 2020 the IRS is making an exception to the 60-day rollover period for RMD repayment and are instead pushing the date back until August 31. This includes Inherited accounts as well, but they must be re-deposited into the original account from which they were taken. The notice also waives the one-rollover-per-year rule for RMDs being rolled back into retirement accounts. With the amount of uncertainty, we have seen this year with the pandemic, there is a chance we will continue to see updates from the IRS and the possible passage of legislation to mitigate the economic impact of the virus. Schedule an appointment today to work with a professional who can assist you with these updated rules and explain how they may impact you.

Financial planning and investment advisory services offered through Prosperity Capital Advisors (PCA) an SEC registered investment advisor.  For more information, please visit www.adviserinfo.sec.gov.